Viewpoints from Kaizen

To set up a representative office (RO) in China used to be a common way for foreign investors that intend to enter into China. The main reason is that an RO is easy to establish. However, China has imposed more registration restrictions and tougher tax rules on ROs since 2010. The establishment and maintenance of ROs have been restricted and discouraged. And it is becoming much more expensive from a tax point of view. On the other hand, the establishment of wholly foreign owned enterprises (WFOEs) have become much simpler and more straightforward. Foreign investors may consider setting up a service type WFOE rather than an RO now. The main reasons are follows: 1. Scope of Business The biggest disadvantage with ROs is that they are not allowed to engage in any profit making activities except for those activities which China has agreed on in international agreements or treaties. An […]

Employee Recruitment As stated in LABOUR LAW OF PEOPLE’S REPUBLIC OF CHINA and A REGULATION FOR EMPLOYMENT OF FOREIGN-CAPITAL ENTERPRISES, foreign-capital enterprises have the right to decide for their company structures and employment needs as necessary of their operations. They also have the right to recruit their own employees by applying to a variety of legal agents including human resource organizations, recruitment fairs and advertising on the media. The recruitment of employees from foreign countries, Hong Kong, Taiwan and Macao requires permission and certificates from the labor office of the local government. Salary Under A TEMPORARY REGULATION OF SALARY AND INCOME IN THE FOREIGN-CAPITAL ENTERPRISES, the enterprise decides the Salary system, salary level and bonus and stipends in line with the national and local minimum salary standards. The increase of the average salary of the employees is based on the development of the enterprise. The company’s annual return, productive rate […]

(I) Technology Transfer (a) Introduction China’s foreign investment policy has traditionally placed a strong emphasis on the transfer of technology to Chinese enterprises. Consequently, technology licensing has played and continues to play a major role in foreign investment projects in China. Applicable laws, regulations and administrative practices have also imposed some significant restrictions on the terms on which such technology can be licensed into China. (b) Applicable Regulations Prior technology transfer rules and regulations imposed certain onerous limitations on the contents of technology transfer contracts and required centralised government approvals. This approval/registration regime has been further streamlined post-WTO to the effect that many of the previously more onerous existing provisions and practices have been eliminated or further relaxed. (c) Prior Technology License Terms Under the prior technology licensing rules, without approval, a technology transfer contract was void. It was also not permitted to include any of the following restrictions or […]

(I) Representative Office The most basic form of foreign business presence in China is the Resident Representative Office (RO). A China Representative Office provides a permanent base from which its resident personnel may conduct local sales and purchasing activities. As a practical matter, it is desirable, and in most cases necessary, to establish a formal Representative Office for a foreign company to do the following in China: – Open an office with company signage – Print company business cards showing local contact information – Open bank accounts – Import office equipment and supplies – Import personal effects of resident company representatives, and – Hire Chinese employees. Representative Offices are prohibited from engaging in “direct business operations” and violations may result in fines and the closure of the office. There is no precise definition of “direct business operations”. However, it is clear that the Representative Office may not directly enter into […]

(1) Taxpayers Taxpayers include enterprises, units, individual household businesses and other individuals who possess and operate vehicles and/or vessels within the territory of the People’s Republic of China (excluding enterprises with foreign investment, foreign enterprises and foreigners). (2) Tax base, tax amount per unit and computation of tax payable The tax base are classified into two categories respectively for vehicles and vessels: the tax base for vehicles is the number of the taxable vehicles or the net-tonnage of the taxable vehicles; the tax base for vessels is the net-tonnage or the deadweight tonnage of the taxable vessels. The annual amount of tax payable is separately computed for vehicles and vessels: a. For vehicles: 60 to 320 yuan per passenger vehicles; 16 to 60 yuan per ton ( net-tonnage ) for cargo vehicles; 20 to 80 yuan per motorcycle; 1.2 to 32 yuan per non-motorized vehicle. b. For vessels: 1.2 to […]

(1) Taxpayers At this moment, this tax is only applied to the enterprises with foreign investment, foreign enterprises, and foreigners. The users of the taxable vehicles and vessels are taxpayers of this tax. (2) Tax amount per unit The tax amount per unit is different for vehicles and vessels: a. Tax amount per unit for vehicles: 15-80 yuan per passenger vehicle per quarter; 4-15 yuan per net tonnage per quarter for cargo vehicles; 5-20 yuan per motorcycle per quarter. 0.3-8 yuan per non-motored vehicle per quarter. b. Tax amount per unit for vessels: 0.3- 1.1 yuan per net tonnage per quarter for motorized vessels; 0.15-0.35 yuan per non-motorized vessel. (3) Computation The tax base for vehicles is the quantity or the net tonnage of taxable vehicles The tax base for vessels is the net-tonnage or the deadweight tonnage of the taxable vessels. The formula for computing the tax payable is: […]

There are 14 kinds of taxes currently applicable to the enterprises with foreign investment, foreign enterprises and/or foreigners, namely: Value Added Tax, Consumption Tax, Business Tax, Income Tax on Enterprises with Foreign Investment and Foreign Enterprises, Individual Income Tax, Resource Tax, Land Appreciation Tax, Urban Real Estate Tax, Vehicle and Vessel Usage License Plate Tax, Stamp Tax, Deed Tax, Slaughter Tax, Agriculture Tax, and Customs Duties. Compatriots from Hong Kong, Macao and Taiwan and overseas Chinese and the enterprises with their investment are taxed in reference to the taxation on foreigners, enterprises with foreign investment and/or foreign enterprises. In order better to encourage inward flow of funds, technology and intelligence, China provides numerous preferential treatments in foreign taxation, and has successively concluded tax treaties with 60 countries (by July, 1999): Japan, the USA, France, UK, Belgium, Germany, Malaysia, Norway, Denmark, Singapore, Finland, Canada, Sweden, New Zealand, Thailand, Italy, the Netherlands, […]

(1) Taxpayers At present, this tax is only applied to enterprises with foreign investment, foreign enterprises and foreigners, and levied on house property only. Taxpayers are owners, mortgagees custodians and/or users of house property. (2) Tax base, tax rates and computation of tax payable Two different rates are applied to two different bases: one rate of 1. 2% is applied to the value of house property, and the other rate of 18% is applied to the rental income from the property. The formula for calculating House Property Tax payable is: Tax payable = Tax base ¡ÑApplicable rate (3) Major exemptions and reductions Newly constructed buildings shall be exempt from the tax for three years commencing from the month in which the construction is completed. Renovated buildings for which the renovation expenses exceed one half of the expenses of the new construction of such buildings shall be exempt from the tax […]